Having our cake and eating it too makes sense Dominion Post, 7 February 2012 By Stephen Jacobi

Having our cake and eating it too is a long-standing principle of New Zealand’s external economic policy. It makes sense for a small, distant trading nation to seek equality of access to global markets and to refrain from taking sides in others’ geo-political manoeuvrings.

That strategy has served us well ever since Britain joined the European Community and New Zealand began the trade diversification effort. It has helped us more recently too as markets in Europe and the United States have been in trouble and our bacon has been saved by Australia, China and other markets of Asia. Increasingly today our national competitiveness is determined by the ability of our companies to supply into the complex, multi-country global supply chains that now dominate business. New Zealand’s external economy is linked more than ever before to global markets and to this new economic and commercial reality.

If the numbers of New Zealanders opposing the sale of farm land to offshore interests are to be believed, it is obvious that more needs to be done to explain to citizens why such transactions are in New Zealand’s interest. Political posturing aside, the relevance of the Shanghai Pengxin deal is that it will provide not only much needed investment to redress some poor farming and environmental practices but also enhanced access to the burgeoning Chinese market for consumer dairy products – access in the form of market knowledge and distribution channels which are critical for getting value-added New Zealand milk products to Chinese consumers.

New Zealand’s FTA with China has given our exporters a useful foothold in China but a range of capability and capacity issues, behind the border barriers and other market impediments continue to restrict business development beyond the commodities of milk powder and logs. Partners like Shanghai Pengxin can help us overcome these barriers. It is their willingness to invest in our productive economy which contributes to economic growth, jobs, and ultimately the tax revenue that pays for hip replacements, roads and schools for New Zealanders.

At the same time as voices are raised against Chinese investment others are concerned that the Trans Pacific Partnership (TPP) is being advanced by the Americans as a means to contain Chinese economic expansion. Following last November’s APEC meeting in Honolulu TPP has now gathered significant political momentum especially in the United States. There is a major effort underway to see if it possible to conclude the substantive part of the negotiation at least amongst the existing nine partners by around the middle of the year. The aim would be for final decisions to be taken by Leaders when they meet again at APEC in Vladivostock in September.

All parties are conscious of TPP’s broader ambition to be a pathway to the Free Trade Area of the Asia Pacific (FTAAP) – even the Chinese, who are observing TPP more closely than might be evident, have endorsed this idea. TPP cannot lead to FTAAP without China. While US proposals on intellectual property and state owned enterprises may appear directed at China, it is far from clear that they are any more acceptable to the eight other parties and some aspects of what is currently proposed even pose difficulties for implementation in the United States itself!

New Zealand seeks to be a very good friend of both the United States and China. If successful TPP will give us the same rules-bound economic relationship with the United States that we have with China and which our competitors Australia and Chile already have with the United States. We need to pursue TPP precisely for the same reasons we should be open to productive foreign investment – we need to integrate even more in the region, we need to balance out dependence on one market with others and we need improved access to better performing global supply chains.

President Lyndon Johnson is credited with having first uttered the sentence “chew gum and walk at the same time”. This too has become a principle of New Zealand external economic policy. Just as we can have the closest of relationships with both the United States and China, we can and must actively pursue other partners. As well as TPP, negotiations are currently underway with India, Korea and Russia/Belarus/Kazakhstan. An agreement with the Gulf Co-operation Council (GCC) has been concluded but not yet signed. A potentially ground-breaking study process has been initiated with Chinese Taipei. Engagement is underway with Japan, Canada and Mexico about joining TPP. All of these initiatives are being implemented carefully and cautiously and in close consultation both with business and civil society stakeholders. Their progress waxes and wanes according to the negotiating dynamics. Some like the FTA with the GCC and Korea are overdue for completion. The proposed deal with India represents huge economic opportunity in a market where New Zealand has barely got to first base. With Russia and potentially Taipei, we are, as we did earlier with China, boldly going where no-one has gone before.

Having our cake and eating it too requires action both at home and abroad. Opening doors overseas is one thing: ensuring New Zealand business can go through them is another. Increased investment is the key to promoting enhanced domestic capacity as well as offshore expansion.